Many manufacturing supply chains have quickly grown more complex, as one or more operations become outsourced, perhaps to foreign countries. For example, these operations have been outsourced as a result of companies working to lower manufacturing costs by taking advantage of cheaper materials and labor costs in foreign countries. While outsourcing drives down the manufacturing costs, there is often an offsetting increase in financing costs associated with outsourced operations. More specifically, the increase in financing costs may be due, at least in part, to risks associated with doing business with unknown suppliers, many of whom have no previous relationship with the buyers or financial institutions. Therefore, the increase in financing costs oftentimes offsets at least a portion of the reduced manufacturing costs. Suppliers, including foreign and/or domestic suppliers, that must shoulder a larger portion of the financing costs will generally pass along part of the financing costs to the buyer. At the very least, the cost of financing the buyer's and supplier's operations in the supply chain are not optimized.
Compounding the problems associated with financing the operations of the participants in global supply chains is that many asset-based financial solutions offered by lenders and other financial institutions do not consider offshore and/or in-transit inventory. That is, many lenders and other financial institutions are unwilling to consider offshore and/or in-transit inventory as part of a borrower's lending base or collateral. Even where offshore and/or in-transit inventory may be considered part of a borrower's lending base or collateral, the borrowers may receive less than optimal interest rates and advance rates because lenders and other financial institutions remain wary of the inherent risks of global trade (e.g., country risk, in country lien perfection issues, lack of control and visibility of inventory, unknown or unstable foreign suppliers, etc.) as well as the inherent difficulties of seizing inventory used as collateral due to a variety of factors including foreign legal jurisdiction issues, logistic issues, the velocity of the physical supply chain, etc.
Moreover, with global trade, many buyers are forcing suppliers to shoulder the cost of financing for longer periods of time. For example, many domestic buyers are requesting that foreign suppliers move away from burdensome letters of credit to open account terms. With open account terms, suppliers may not receive payment or financing for their goods until well after the goods are received by the domestic buyers.